Secret behind successful companies? It's innovation

Secret of successful companies? It's innovation

Demand for consumer durables has grown much faster in developing markets like India and China as compared to developed markets in the last three to four years.

The consumer durables market in India in 2009 was Rs 100,000 crore (Rs 1 trillion) having grown at 25 per cent per annum during 2005-09.

Positive shifts in consumer demographics have driven this demand surge in India. While on one end these shifts have led to the growth of newer categories (for example LCD TVs, laptops, split air-conditioners), they have also enabled consumers at the lower end of the income pyramid to become first-time users (like mobile phones).

Secret behind successful companies? It's innovation

A research by Tata Strategic indicates that with continued growth of the Indian economy in the coming years, share of spend on non-food items in the overall consumer spend pie is expected to increase.

And durables, being one of the key non-food spend categories is expected to benefit from this trend.

Tata Strategic estimates that the per capita durables spend in India and the durables market is expected to continue to move on its high growth trajectory of 25 per cent per annum in the next five to seven years.

Secret behind successful companies? It's innovation

The past decade has seen the entrenchment of the Korean chaebols in the Indian consumer durables market.

While they have taken the top two positions in most key categories, the market gets fragmented as we move beyond the top three to four positions (figure).

Thus, for smaller players or newer entrants the problem is two fold. On one side they are up against the large companies with deep pockets, a strong product pipeline, top-of-mind brand recall and robust distribution.

Secret behind successful companies? It's innovation

Two factors determine the success of the innovation agenda - superior ability to identify un-served/underserved consumer needs and product development through technology accessed from outsourced partners.

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Image: India's super plough called Bullet Santi won a US patent as well.Photographs: National Innovation Foundation.

Secret behind successful companies? It's innovation

In step 2, this understanding is deepened to identify new pockets of opportunity for companies (concepts).

Existing price-features-benefit matrix in the market, unoccupied positioning planks or planks occupied by minor players, megatrends likely to impact the Indian market in the medium term and underserved needs or pain points of the Indian consumer are combined to create concepts.

Next key characteristics for each concept like target consumer segment, value proposition and the basis of differentiation are outlined.

Secret behind successful companies? It's innovation

Step 3 is aimed at optimising innovation within the limited resources available to the company.

The concepts are prioritised based on factors like their brand affinity, proof of concept, technology access, commonality of target consumer segment, distribution overlap and expected future competition.

Consumer validation of the filtered concepts forms an important basis to estimate the likelihood of success of these opportunities.

Secret behind successful companies? It's innovation

In step 4, prioritised concepts are then developed further to create the innovation based entry or growth plan for the company.

The product innovation framework provides a robust methodology for companies in the Indian durables market to deploy a systematic process to develop their strategy enabling them to simultaneously differentiate from local competition and fight the large global players.

In conclusion, prosperity through innovation can be the only sustainable route for rapid profitable growth in the consumer durables market in India.